World stocks extend losses; sterling receives pounding

LONDON (AFP) - World stock markets slumped on Wednesday after oil prices again fell and the pound sterling hit near seven-year lows on worries about the global economy and Britain's future in the EU.

In afternoon trading, leading indices in the euro zone were well over 2 per cent lower, with exchanges on the periphery in Madrid and Milan both plunging more than 3 per cent.

London's FTSE fell by 1.6 per cent, with US shares following suit, also opening sharply lower.

"Euro zone indices are going to suffer under the same Brexit fears currently plaguing the pound and the FTSE," said Connor Campbell, financial analyst at Spreadex trading group, referring to a possible exit by Britain from the EU.

The pound slumped to US$1.3913 at one point - the lowest level since March 2009.

As Britain prepares for a June 23 referendum on EU membership, British Prime Minister David Cameron has warned that a departure would threaten its economic and national security.

But London Mayor and Conservative rival Boris Johnson has dealt a blow by backing a so-called Brexit despite Cameron winning a deal on EU reforms.

The pound has been struggling for some time.

"Unsurprisingly, the concerns for the global economy have continued to have disastrous consequences for the pound, which often performs poorly in a risk-off environment," said Phil McHugh, at trading group Currencies Direct.

"Global risk sentiment has taken another swing lower as a slump in Asian and Chinese equities shadowed a similar decline in the US," he said, pointing also to falling oil prices as contributing to the weak sentiment.

Crude has resumed its decline after Iran's oil minister called a proposal by Saudi Arabia and Russia to maintain production levels "ridiculous", as it seeks to boost output after years of sanctions-constrained sales.

US oil prices fell 3.4 per cent to US$30.78 a barrel in opening trade on Wednesday.

Asian bourses earlier tracked losses in global markets, with Tokyo stocks weighed down by the strength of the yen which is seen as a haven asset.

But Shanghai closed up almost 1 per cent on Wednesday, reversing losses from earlier in the day, on expectations of economic reform pledges at an upcoming annual meeting of lawmakers.

Ahead of a meeting of Group of 20 finance ministers and central bank chiefs starting on Friday in Shanghai, there have been calls for increased fiscal support as authorities grapple with reduced monetary leeway. Japan and the euro zone have already seen negative interest rates. London - FTSE 100: Down 1.64 per cent at 5,864.40 points Frankfurt - DAX 30: Down 2.82 per cent at 9,151.44 Paris - CAC 40: Down 2.69 per cent at 4,124.51 EURO STOXX 50: Down 2.59 per cent at 2,812.47 Tokyo - Nikkei 225: Down 0.85 per cent at 15,915.8 points (close) Shanghai - Composite: Up 0.88 per cent at 2,928.9 points (close) Hong Kong - Hang Seng: Down 1.15 per cent to 19,192.5 points (close) New York - Dow: Down 1.47 per cent at 16,190.07 Euro/dollar: Down at US$1.1010 from US$1.1029 on Tuesday Dollar/yen: Down at 111.38 yen from 112.91 yen Pound/dollar: Down at US$1.394 from US$1.4148

The Straits Times

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